Final report : August 1, 1997-March 2, 1998 -- financial sector development project II : contract #PCE-Q-00-93-00071-00, delivery order #806 -- assistance to the Cooperative Bank of Uganda

A number of milestones were attained during the course of the delivery order. For the first time, the Bank has a strategic plan through the year 2000. It also has a properly completed profit plan for 1998. The structure and the direction for the Bank"s turnaround have been established. In addition, the retirement plan has been restructured into a performance-based plan, resulting in annual savings in operating costs of 350-500 million shillings. A significant portion of the employees" compensation is now based on the Bank"s ability to be profitable. Several capital transactions have improved the Bank"s core capital position from a negative 3 billion shillings to a positive 6 billion shillings. These transactions include the promised provision by USAID of two billion shillings through the P.L. 480 program; a capital contribution by employees of 1 billion shillings from their former pension reserve (in return for which employees will receive a distribution of the Bank"s stock); and approval by the Bank of Uganda of a restructuring of six billion shillings of revaluation capital to share capital in order to reflect the transition to the newly incorporated bank. Considerable capacity building has taken place with badly needed training and workshops in the areas of accounting, finance, data processing and credit management. The computerization and telecommunications programs are still incomplete due to the Bank"s failure to receive promised equipment. The delay has set back certain aspects of the turnaround by at least a year. A recent appraisal of the Bank"s property reflected a value significantly less than the appraisal value of 5 years ago, since there is not an active market for property like the Bank"s in Kampala. However, extension of the current land leases is expected to add to the calculated value of the property. These lease extensions are critical; if the current valuation remains, it might be necessary to reflect lower property values on the balance sheet, which could lead to a reduction in the amount of capital and, perhaps, to a depreciation of the value of the buildings over the remaining life of the lease. Such a change would lead to significantly higher amounts of depreciation being charged to operating expenses. Corruption and dishonesty are prevalent throughout the Bank, and only strong and consistent management over several years will correct the problem. USAID should commit itself to making this happen.